It’s still hard to say what will happen with bitcoin, the trendy digital currency that has been in the news the last few years. While it was getting a lot of media attention, it saw incredible increases in value, but eventually the market came crashing down, and now it’s difficult to predict how significant bitcoins will be in ten or twenty years. Whether or not bitcoin becomes the currency of the future like its supporters hope, the fact remains that bitcoins have value, and it may be useful to know how bitcoins would play into estate planning. Though this is still a new field, there are some general strategies and concepts we can rely on when integrating bitcoin into estate planning.
What is Bitcoin?
It may first be helpful if you know what bitcoin is. Though it was in and out of the news, many people still have a very bad understanding of it. Bitcoins are digital currency that can easily be converted to many real currencies including U.S. dollars and euros. Bitcoins are actually incredibly complex–encrypted code that is generated by computers. You can transfer real currency to an owner of a bitcoin, and then he will make a transfer of the code to your bitcoin wallet which has its own private key and address. All bitcoin exchanges are publicly recorded, which brings transparency to the system, but the system only records transactions. There is no way to track the senders and receivers of bitcoins, which has made it an interesting currency for those trafficking in illegal goods.
Though it is called a virtual currency, the truth is that there are very few companies that will accept bitcoin. Instead it must usually be converted into real currency if you want to use it. That is why many people consider it as more of a commodity and why the IRS now considers bitcoin as property.
Bitcoin and Estate Planning
Bitcoins like other assets are included in the owner’s estate, and if you’d like to distribute your bitcoins to a specific person, that should be arranged in a trust or a will. Bitcoins were designed to give users total anonymity and security, so unless you share the details with your family or financial advisors, it may become impossible for the inheritors to access your bitcoins. There is no bank that your family can call or visit, so it is very important that you inform others about your bitcoin investments and provide them with the details to access them after you’ve passed away. Bitcoin is unlike all other types of currencies, and if you decide to invest in bitcoin, you will need to make sure that your estate planning properly accounts for the differences between bitcoin and real currency.
Our attorneys are estate planning experts and can help you make arrangements, so that your family and loved ones are properly supported after you pass away. If you need help or have questions about estate planning, please feel free to call our office and schedule a consultation.
